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Generation next
by David Woodward

Leading Generation Y through a downturn calls for new organisational techniques. Start by dumping micro-management for autonomy

In a smart, glass-walled meeting room, high up on the 30th floor of Barclays Bank's Canary Wharf headquarters, executives from some of the UK's brightest businesses are receiving a master class in Generation Y. To the right, a cartoon mural offers its own interpretation of youth culture, supplying cute maxims, such as "you can't fight Facebook" and "Generation Y are easier to manage than you might think!" At the front, the children of the 1980s (stock phrase: "9-5—why would you?") field questions from a curious audience. "What does career development mean to you?" "What do you think of the career ladder?" The representatives of Generation Y give confident, expansive answers. This is their time.

Event organiser Sally Bibb is co-founder of Talentsmoothie, a leadership consultancy. She says businesses sign up to her courses in an attempt to study Generation Y "as employees and as consumers". If they are different, she says, "how are they different?" It's a question that's been bugging boomers and "Gen-Xers" ever since the term was first coined in 1993 by the magazine Advertising Age to describe those born between 1974 and 1980. The scope has since widened. A commonly accepted definition of Generation Y is now anybody born in, or after, 1980.

Sue Honore, consultant at Ashridge Business School, is in the middle of conducting her own report into Generation Y's impact on business. Honore wants to avoid easy stereotyping—"plenty of generalisations were made before these workers were even in the workplace," she says—but in interview after interview the same conclusion emerges: "As a generation, they have been mollycoddled, wrapped in cotton wool." It's easy to see why. By the time many of the UK's Generation Y population were old enough to read a newspaper, Britain was ready to begin its greatest ever period of sustained economic growth. For the children of the 1980s, recession was something that happened to other people.

Honore says that reality "will come as a shock". HSBC, Marks & Spencer and Rolls-Royce have all recently cut their graduate intakes by up to 20 per cent. And it's far worse in the City, with the credit crunch forcing many university leavers to rethink careers in finance. Companies all over the country are starting to narrow their lists of "acceptable" universities. With unemployment expected to edge towards three million over the next 12 months, this is now the fiercest job market in a generation.

On the surface, the current crop of graduates seems uniquely ill-equipped for the fight. Last April, Talentsmoothie published a study of 2,500 people born after 1980. It found that the citizens of Generation Y had little interest in their parents' work-dominated lives. The kids of the 1980s weren't seduced by salary and status. Instead, the ability to "make a difference", balanced by plenty of downtime, was their career dream. Most pertinent to the corporate world was the disturbing notion that Generation Y workers were unprepared to put up with stressful working conditions: when unhappy, they simply resigned.

An admirable stance, but how does it square with the competitive paranoia of today's job market? Talent-smoothie co-founder Simon Walker says, somewhat surprisingly, that despite the current climate, Generation Y hasn't altered its values. Recession or no recession, this is a group that will "walk away" if the company doesn't match its ideals. "While Generation X clings on, Generation Y is being proactive and leaving before they are pushed," he says, adding that clients in the consumer electronics, media and public sectors have all recently been "amazed" to find their youngest employees handing in notices, seemingly unaware—or perhaps unafraid—of the downturn. "Generation Y are on average more optimistic than Generation X. Call it inexperience, naïvety, whatever, but it leads to proactiveness and flexibility of mind," he says.

Back on top of the Barclays tower, the first panel speaker is Lamorna Trahair, a 23-year-old entrepreneur with hair as spiky as her opinions. To a roomful of executives, she probably appears about as Generation Y as it's possible to get, although the suit is an unusual accession. "I rebelled by not ironing my shirt," she says. The threat of redundancy doesn't seem to faze her, or her peers. "It's not that scary," she says. "Our attitude is different." To Trahair, there will always be employers out there "lucky enough to employ us".

Trahair worked in yacht racing before co-founding travel company the League of Adventurists in 2006. As a non-graduate, she is a firm believer in employers looking beyond academic qualifications. To lump Generation Y into grads and non-grads, she says, is too simplistic. It "wastes" talent. "What are you looking for as an employer—a bit of paper that says somebody has a degree, or commitment and desire to achieve success in the company?"

Part of what business schools are calling "Management 2.0" is about bringing changes that reflect Generation Y's needs. Fostering collaborative structures, where hierarchy plays second fiddle to flexibility, is seen as a way to attract the best graduates. But experts warn that paying lip service to new, Web 2.0 techniques won't wash. A change in culture requires full commitment, from the top down. It needs a CEO who will loosen the reins at the precise point when the temptation to maintain control is at its highest. Professor Adrian Furnham from University College London's Department of Psychology says that recessionary pressures often go hand in hand with a command-and-control management style—stress and strain, he warns, can spur autocratic behaviour.

"When people are under pressure, dark-side characteristics emerge," he points out. "If a person has a tendency towards authoritarianism, then when stressed that nature comes out."

This is the style of management that Generation Y employees seek to avoid, says Honore. "In the UK, the school system has led them to believe they are a success and that they can always succeed—that they are in control of their destiny. Micro-management doesn't fit in with that."

Dave Corbet, who founded Greengage Consulting to help organisations—predominantly in the public sector—to adopt collaborative working practices, says boards that truly understand the benefits of a flatter, networked hierarchy won't be tempted to switch back to an autocratic style, no matter how bad the recession gets.

"There are those that practice it but don't believe in it, they are the ones reverting to type: all that 'collaborative crap' goes out the window," he says. "The people that genuinely understand collaboration, building relationships to get things done, these people are sticking true to that."

It will be at least 10 years before Generation Y forms a solid majority of the UK workforce. But even as a minority, says Bibb, it's a generation that needs to be heard, especially in a worsening business climate. A company's youngest recruits, she argues, are often best placed to "catalyse leaders to question the way they lead and the way organisations are run".

While Generation X and boomers are still running companies, Generation Y is a firm's best chance of making sure it can understand and respond to its customers. "Generation Y are natives of the digital world, the rest of us are immigrants," says Bibb. In Don Tapscott's book, Grown Up Digital, the author discusses the present and future impact of the "Net generation", a tech-savvy Generation Y, full of smart, networked, motivated individuals. Tapscott cites the crucial role of the co-ordinated social networking strategy behind Barack Obama's election campaign. Without the support of Generation Y, he says, Hillary Clinton, and not Obama, would have won the vote to fight John McCain for the presidency. While Generation X grew up anxious, the Net generation, argues Tapscott, is more positive, more proactive, and with the help of technology, values multi-tasking and collaboration through networks as the way to solve complex problems.

But how do you manage a generation that looks sideways rather than upwards for inspiration? How will these flatter organisations perform under the strain of a drawn-out downturn? Much of the focus will be on high-profile guinea pigs Cisco and Semco: how will these innovative management models stand up to a fierce world recession?

At Brazilian engineering firm Semco, employees decide how much they are paid and what hours they work. Chief executive Ricardo Semler values autonomous business units driven by peer pressure, not bureaucracy. At Cisco, CEO John Chambers has reorganised the company, from a command-and-control operation into an empowered network of councils and boards. These fast-moving, flexible units are backed by a new financial incentive system and an ever improving set of custom Web 2.0 tools, such as blogging, vlogging (video blogging) and wikipages. Chambers calls it "leading from the middle".

Closer to home, at London advertising agency St Luke's, roughly a third of the workforce is from Generation Y. The entire company is geared towards getting the best out of its youngest employees, from its structure (the firm is a Qualifying Employee Share Ownership Trust, or QUEST, in which all employees are entitled to equity after six months) to the collaborative way in which it organises work. The advertising industry is "silo led", says managing partner Neil Henderson. "The planners talk to consumers, the account managers talk to the clients, the creatives do the scripts. Here we are very collaborative between the departments and between the agency and the client." St Luke's is a democracy of ideas.

Hierarchy is still important, says Henderson. "We're co-owned but not co-run," he explains. Employees are elected to "the quest" and are given the opportunity to question the board on the shareholders' behalf. As a result, adds  Henderson, everybody experiences a sense of ownership—the feeling that they are in control of their own and the company's destiny, a factor considered crucial for Generation Y development. "It does change people's relationship with each other. They talk about the company as something that they can change."

Managing Generation Y, says Henderson, requires the courage, John Chambers-style, to let talented, networked individuals take control. The only difficulty with all that freedom, he says, is an occasional loss of focus. Then, "it's just a case of bringing them back to understanding where the commercial value is, [through] mentoring and coaching. We have found that it's a generation that really demands feedback—constant feedback—and mentoring."

The temptation, in all areas of business, is to shield employees from the reality of recession, but to Generation Y that shows a lack of trust. "No doubt command and control is sometimes the right way to go. Recession brings surprises and uncertainty," admits Henderson. But at St Luke's, equity comes with a ticket to the AGM. "Money is a very powerful communicator of things. If you can see a company's results and are involved in the strategy, you see where the income has gone—it makes you more aware of the brutality of business.

"It can be alarming at times. But once they've got it they adjust their behaviour accordingly. It's much better than keeping the financial situation away from people so that they don't understand why decisions are being taken. That transparency galvanises them."